“Custody holdings are falling at the Fed and, while the impact is not so clear for the USD, it’s negative treasuries….the securities held in custody for foreign official and international accounts, which foreign central banks make up a large share of the deposits….

There exists a 40% correlation between Foreign EM central bank reserve accumulation and official demand for UST….Falling reserve growth and intervention explains a large share of the selling. While the movements are not what we would term ‘highly’ correlated, they are not zero either. What this means is Central banks are placing a premium on USD cash in hand over the paper in US.” Taken from Citibank Strategy

Near term support to be found in the FOMC on 30-31 Jul and the possibility of a dovish outcome which could support fixed income prices for the time being.

Share this:

Like this:

LikeLoading...

Related

About sahriskmanager

I have worked as a Head of Risk and a risk culture builder at both Asset Management and Commercial Banking Institutions within and outside of Pakistan.
Over the years I have developed exhaustive understanding of risks that exist in both Sharia and Conventional Finance related Investments and Financing/Lending Products.
I have invaluable experiences to share with respect to setting up and restructuring of Financial Risk Management Departments at Islamic Banks and Asset Management Firms . This includes developing policy and procedure manuals, recruiting of staff, imparting Risk Trainings and preparing the entire SDI (System, Design & Installation) work-flow frameworks for the department itself.
What I shall post on these blog pages are my personal experiences, global risk management issues and academic interests which I would like to share with academicians, students and practitioners of FRM - Financial Risk Management all over the world.